Stock markets are gaining strength following the pressure of COVID-19. The result: Investors, convinced that the worst recession has passed, have turned their attention to downtrodden sectors.
As the US economy gradually reopens after months of standstill, investors shift their funds into cyclical stocks – stocks that ebb and flow with the strength and weakness of the wider US economy. This means that stocks that remained on the broader market during the stay-at-home period, such as airlines, retail and energy, are coming back and even leading the market higher.
Below, we highlight three stocks that have even more benefits as the US economy gathers steam and consumers once again rely on their products and services.
1. Lyft
The ridesharing business was one of the first to feel the devastating blow of lockdowns and the entrapment of the economy when millions of people around the world stayed at home, the result of governments that helped curb the movement to stop the spread of the coronavirus.
But as states relax restrictions, people are booking rides again. Lyft (NASDAQ 🙂 said last week that transportation on its platform rose 26% in May from the previous month, helped by strong growth in cities where restrictions caused by coronavirus have eased.
LYFT Weekly TTM
"Over the past three weekends, as restrictions on certain activities in parts of the country eased, there was stronger relative sequential growth in weekend rides versus weekly rides on Lyft & # 39; s rideshare platform," the company said.
After a 7% rise on June 5 to end at $ 38.61, the San Francisco-based rideshare on-demand market shares have nearly doubled since its March low. And according to some analysts, the company has more upside potential.
SunTrust Robinson analyst Youssef Squali repeated his Lyft buy score and a $ 49 price target, saying Lyft's business will continue to improve. "We believe that further easing of constraints, particularly in the West Coast states where LYFT is more prevalent (eg California, Washington), could accelerate the improvement in annual trends over the summer," Squali wrote .
2. Chevron
The global oil industry is adjusting after the COVID-19 pandemic caused an oversupply that caused the collapse.
But after the massive production cuts by the oil producing countries in the past two months, oil prices are rising again, allowing the big oil producers to generate more money. Unprecedented production cuts led by the Saudis and Russia rose prices in May, and the OPEC + group decided on Saturday to extend those limits to July. , down 36% this year, some of the losses have recovered. It ended trading on Friday for over $ 40 a barrel.
Even if this massive restructuring is taking place, investors continue to look for signs of a rebound in demand, so that they can take advantage of the low stock prices of large oil companies.
Of these major oil producers, Chevron (NYSE 🙂 is better positioned to deal with the downturn than its competitors. Unlike former rival Exxon (NYSE :), Chevron was already in a defensive mode late last year, prompting the San Ramon, California-based energy giant to absorb the company's biggest loss in over a decade.
That divergence helps the producer's stock, which recovers faster than Exxon's shares from the low of March 23. The stock is trading at $ 100.81 on Friday and is down 16% this year, making the annual dividend yield a robust 5.36%. For long-term investors, this return offers a great opportunity for fixed income when interest rates are significantly lower.
3. Qualcomm
Investing in chip stocks has been a profitable move during the current economic downturn. Many semiconductor companies have seen an increase in demand for their products, fueled by cloud computing and the gaming industry as more companies transitioned to have their employees work from home.
Nonetheless, many chipmakers continue to face an uncertain environment as tensions between the US and China escalate and demand for those staying at home is likely to ease as the economy opens again and workers return to headquarters.
However, Citigroup analysts believe that Qualcomm (NASDAQ :), based in San Diego, California, is in a different league because of the company's strength in the emerging 5G technology segment.
"There seems to be some strengths in 2H20 in the wireless end market, powered by a 5G upgrade cycle, particularly the iPhone, which we think Qualcomm benefits from," said analyst Christopher Danely in a note.
Qualcomm, which produces chips that connect cell phones and other devices to wireless networks, will receive a big boost from its continued shift to 5G, Rosenblatt analyst Kevin Cassidy wrote in a recent note. The company has a buy valuation on the stock and a target price of $ 105, representing a premium of more than 19% above the chip manufacturer's current share price of $ 88.55.
"Qualcomm will not only benefit from the upgrade of the 5G handset, but will also be the market leader in global 5G capabilities," said Cassidy of Rosenblatt, Bloomberg.
